PE HUB Healthcare Wire Highlights, 5.10.18

healthcare, private equity, mergers, M&A, Bain & Co, Blackstone Group, Kara Murphy
Photo of Sarah Pringle, reporter at Buyouts.

Seed – Athenahealth is in play. Could private equity pony up?

Happy Thursday!

A prominent activist investor is back in the headlines in the universe of healthcare M&A this week.

Paul Singer’s activist hedge fund, Elliott Management, launched an offer to take out Athenahealth for $160 per share, valuing the healthcare IT company just south of $7 billion.

Whether you’re shocked by the news or not, the development presents more questions than answers…

Among them: Does Elliott, which began agitating for change at Athenahealth last year, actually want to outright buy the company via its PE arm – Evergreen Coast Capital? And could the hedge fund’s actions lead a group of sponsors to join forces to pursue a club deal? Or rather, will a non-healthcare strategic come out of left field with a competing bid?

At least a couple industry sources I spoke with expressed their belief that Elliott’s ultimate agenda isn’t to buy Athenahealth: “The only angle I see: they [Elliott] feel like they know someone that will buy it,” one source said.

Another source agreed, tipping his hat to Elliott’s “intelligent pricing” … “They perfectly bid so the board would have to take it seriously … opening up the door for a big strategic review,” the source said. I mean, a 27 percent premium and the bid’s all-cash nature are both pretty compelling.

Still, one source close to Elliott reiterated that the proposal is serious, and said the investor is fully prepared to lead this take-private should Athenahealth accept the offer. Elliott has in fact taken public companies private in the past. That includes Gigamon, the provider of traffic monitoring technology that it bought last fall in a deal valued at about $1.6 billion.

Looking at it from a PE perspective, the list of buyers that could put up the equity to fund a take-private of this size is minimal – even in a club deal. And the likelihood that a sponsor could do it on their own? “Can the math work? I don’t really see it,” one of the sources said.

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